Credit Card Fees
The ultimate aim in managing your credit card is to avoid ever having to pay credit card fees. Follow our tips and guides to help ensure your credit card transactions are free.
Credit card fees and charges are responsible for a lot of consumer aggravation. More and more people are feeling ripped of when they suddenly see some fees they never knew existed on their credit card statement and the more you learn about them, the better you can protect against the possibility of attracting them yourself.
How you can stay clear of credit card fees and charges.
The cost is staggering. Some $30 billion a year are billed to the accounts of credit card holders in extra fees and charges most people don’t know these even exist. Since we are using credit cards for just about any shopping we do, it is becoming more important than ever to use them smartly to your advantage.
As the cost of debt increases everywhere, we too have to fork out more money for our personal debt. We do this by paying increased credit card fees, often hidden in the fine print of a credit card terms contract.
The more you understand about these potential pitfalls, the wiser you can be in managing your card and its associated costs. The following tips will level the field and help you to see the bigger picture. It is a round-up of the most common credit card fees:
Choose direct debit
You can choose to link your transaction and credit card account so money is directly debited from your everyday transaction account into your credit card account. This will allow you to meet your minimum credit card payment each month and potentially avoid fees associated with late payments. This method is sometimes called Card Pay Direct, however this can take a month to be fully operational and hence you need to make sure you manually pay the next amount due. This option may not be available to everyone so its important to speak to your financial institution to make full use of this facility if its available to you. Once this is set up, do not forget to have enough money to cover your monthly payments.
Over the limit fee:
The over the limit fee is a silent killer. It’s easy to spend more money on your card than allowed. All you need is a holiday purchase or some expensive household item like an LCD TV and you are in danger of going over the allowed limit.
It pays to keep an eye on your spending if you always get trapped with this fee. Another tips is to pay off your credit card in full each month. With Internet banking access there should be no excuse not knowing where exactly you are at with your current card balance. However, since online banking often shows you a delayed account status it would be wise to call your bank if you want to know the exact state of your balance.
Late fees sting consumers a lot and they come dearly. You could be expected to fork out between $25 – $50 if you are lagging behind with your credit card payment. For card holders with several cards this means even more trouble as paying late on the one card will affect your other cards in a snowball motion.
Unfortunately, many credit card holders in Australia are subjected to late payment and penalty charges when they fail to pay their bill on time. It’s too bad that financial institutions and banks always have penalty charges for late payments and outstanding balances.
In addition to penalty charges, the interest rates are also increasing and if you are to compute the fees for these interest rates, you would notice that the total amount of those rates would be enough to pay your next statement.
Despite large interest rates for home loans and other loans, banks and financial institutions offer you ways to get rid of your credit card debts.
Plus, the card company can actually sting you double for being late by increasing your ‘fine.’
Use a diary and mark the payment date each month in big fat red. Even better, pay your card with direct debit to automate the process and never needing to worry of being late.
Cash advance fee:
If you can avoid taking out cash with your credit card, then do so. Cash advance fees are very expensive. If you use an ATM, then more charges are being added to your account for using the system. Unless it’s an absolute emergency you shouldn’t use this feature at all.
Monthly service fee:
Even a no-annual fee credit card could attract monthly service charges. Usually they range around $5 per account, but can be higher and add up during the year.
Currency exchange fee:
Do you travel overseas a lot? Or are you a frequent online shopper with overseas merchants. If so, keep an eye on your currency exchange fees. Some companies charge you 3 per cent extra in fees. It pays to use the local currency when you make these payments and you should check these charges before having an unwelcome surprise on your account.
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- 0% p.a. for 9 months on balance transfers
- Cash Advance Rate of 21.99% p.a.
- 55 days interest free
- Minimum Income Requirement of $65,000 p.a.
Balance transfer fee:
Even if you get a fee-free balance transfer honeymoon period you could be made to pay fees for transferring your balance to a new balance transfer credit card. Depending on the company you’re with this could relate to a percentage of the amount you transfer or a set fee.
Merchant surcharge fee:
Many merchants relate some of their costs onto you. Telstra is a classical example. Their credit card surcharge payment fees increase by September the 14th. for credit card payments made on accounts and you need to be aware of these.Merchant surcharge fees can add a lot to your bottom line.
Actions you can take to avoid being charged credit card fees
Sometimes it is not always possible pay off balances in full every month, but you can still avoid hefty credit card fees by getting credit cards with little interest.
When you fill out an application for a credit card you will be issued a card based upon an agreement made between you and the credit card company. Basically, this agreement means that the bank will pay for your purchases within a certain set limit.
The agreement is also reached that if you cannot pay off the entire balance for a month then you will have to do pay an agreed-upon interest rate. 0% interest credit cards are really good for a certain introductory period before the interest rate rises and you have to pay the standard rate. Also included in this agreement document are the credit card fees and charges.
You can choose to get a low interest card, but you will have to carefully watch for any hidden credit card fees. Make sure that the interest rate does not rise after a few months, look at the annual fee and read the terms and conditions that are written in fine print on the agreement.
Watch your spending
keep a sharp eye on what you are using your credit card to purchase. A credit card is made of plastic and it is easy to forget that it represents real money. Make sure that you only spend within your budget limit and be sure to keep a running total throughout the month on any purchases you have made.
You can use credit cards to help build up a positive credit history so that when it comes time to take out a mortgage for a new house the bank will take you seriously. It can be hard to get credit if you have not proven yourself with smaller credit.
Instead of using payday loans, which have become very popular lately, you can use a low interest credit card to accomplish the same thing and save a lot of money by doing so.
Many credit card fees can be avoided if you just take the time to read all the fine print on your agreement, watch spending and use your card wisely.
How to get rid of credit card debt by minimising credit card fees:
If credit card debt is something that hangs in the back of your mind, you need to take action to get rid of it – in fact, you can actually transfer it to a different financial institution, and often for a special balance transfer rate where you can pay 0% interest for 6 months. A lot of people are now considering that and transferring their debts to another bank.
This is a good option, especially if your complaints to your existing bank fall on deaf ears. Numerous financial institutions offer features that are customer friendly and all you have to do is to choose one that suits your current needs.
Banks and financial institutions have a program such as a balance transfer credit card. You can apply for this if you want to transfer your debt from your previous bank. There are often additional introductory features that you can take advantage of.
However, you should know that each institution offers different terms and conditions and it is up to you to choose which one is favorable for you. Make sure you understand the credit card fees associated with the card you consider. Some banks offer a zero percent interest rate for the first six months while some offer low interest rates until you are able to completely pay off your debt.
ASIC’s consumer tips about credit card fees:
The best way to manage your credit card fees is by understanding them and choosing the right card for your circumstances. Always read the small print of credit card terms and if in doubt, speak with your lender and ask questions.
ASIC provide some great tips on avoiding credit card fees from merchants including:
1. Keep your interest payments as low as possible:
Try if you can to pay your balance off each month in full. If you can do this, you will benefit from the period of interest-free days offered on purchases. Take note that if you make a balance transfer to your card, that amount is not treated as separate from your purchases, rather they are lumped together, meaning that your interest-free days will be lost if the debt goes beyond the month. In effect, you will then be hit by credit card fees you would have otherwise avoided. Similarly, any cash advances you withdraw will void your interest-free days.
Do not be tempted to pay just the minimum payment, thinking this will leave more money in your pocket. This misguided behaviour will lead to higher interest being tacked on the larger, unpaid part of the debt – another type of credit card fee. The sooner you repay the debt, the less interest will accrue. Then you really will have more money in your pocket.
Know Your Repayment Date
Your minimum repayments will be due on the same date each calendar month. Rather than trying to find one larger sum of money each month to pay your minimum payment, try to make several smaller payments throughout the month that add up to the same or more than the amount due before the due date. This will help you avoid paying high overdue payment fees.
Know How Interest Is Calculated
Banks charge interest daily on the balance owing and show you the accrued interest amount on your statement at the end of the month. By making several smaller payments throughout the month that add up to the total amount due by the due date, you’re effectively reducing the amount of interest you can be charged. This is because you’re decreasing the balance by small amounts regularly.
Know What Subsidiary Fees Apply
Some credit cards charge fees for additional cards. Others may charge a ‘reward fee’ for accessing their rewards programs. You might also incur foreign fees if you have any international transactions. Always check what fees will apply to your account.
When it comes to learning how to avoid paying credit card fees and charges, always make sure you ask your lender or banking representative plenty of questions. It’s your money after all.
2. Avoid using your credit card in an ATM:
This is a terrible way to borrow money, and leads to very heavy credit card fees. Using your credit card in an ATM looks and feels the same as using a debit card, but it is not. You are actually borrowing money at a much higher rate of interest, and this particular credit card fee starts clocking up the moment the cash leaves the machine. Credit card cheques take the same toll.
3. Only use your credit card for emergencies when abroad:
Although adverts make much of the fact that you are able to use your Visa or MasterCard in many thousands of outlets worldwide, you should bear in mind that most card providers charge a currency conversion fee when you use your card in another country. If you want to avoid credit card fees, your credit card should not be your regular mode of payment when travelling abroad.
4. Exception Fees:
A failure to meet even the minimum payment on your card, or spending beyond your allotted credit limit, will lead to a special credit card fee known as an exception fee. These are one-off charges that only add to your financial burden. Keep a close eye on any direct debits set up on your account, and understand how much leeway you have between their total and your credit limit.
5. Remember your credit rating:
Credit card fees are bad enough, but also remember that any long-standing struggle to repay a debt can negatively impact your credit score. If you have run up an unmanageable debt, it is best not to compound the mistake by keeping things to yourself. Your card provider can help, tailoring an individual payment plan to better suit your needs and keep those credit card fees to a minimum.
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